FMJ - May/June 2017

Making Green Equal Green

John Rimer 2017-05-12 00:28:20

While recovery from the “Great Recession” has loosened purse strings to fund many facility improvements, sustainability projects still have a hard time meeting organizational financial criteria. Most of the low-hanging “green fruit” — such as lighting upgrades, variable frequency drive installation and economizer tuning — has been harvested, leaving the larger, more costly projects that cannot be justified through energy savings alone. For example, if your next round of potential energy conservation measures includes updating HVAC, the energy savings will unfortunately only return a payback roughly equal to the life expectancy of the equipment. To justify investment in such updates, facility managers need to leverage a more comprehensive business argument that couples energy savings with hard and soft cost benefits. THE RULE OF 100/10/1 The first key step in winning approval is to roll in additional financial factors that would bolster the project’s fiscal stature. Energy savings, while important, are typically just a mere fraction of the overall organization’s operating expense. It is often targeted, however, because utility costs are generally readily available and calculating potential efficiency gains is relatively straight-forward — especially for the aforementioned low-hanging “green fruit.” For example, a lighting project consisting of replacing T-12 fluorescent fixtures with T-5s or LEDs is easily estimated (with a few baked-in assumptions, of course). Potential operations and maintenance savings, on the other hand, tend to be more difficult to determine because many organizations do not capture the necessary data to measure and tabulate such; thus, the necessity for all facility organizations to procure and fully utilize a computerized maintenance management system (CMMS). For example, consider the unplanned repair costs that could be mitigated by the replacement of the aging chiller, cooling tower or air handler. Those Band-Aid fixes do add up; plus, they take staff and dollars away from completing the more beneficial preventive and predictive maintenance. Not to mention the even greater costs of downtime or business impacts, which is the third factor that should be included in the argument. Studies have shown that seemingly insignificant office temperature excursions can reduce occupant productivity by at least 2 percent for every one-degree Fahrenheit deviation; thus, a downed or limping HVAC system can drastically affect the bottom line. These three components — productivity improvements, facility cost reductions, and increased energy efficiency (commonly referred to as the “rule of 100/10/1”) — should be married together to build a sturdy, three-legged stool upon which the below discussed aspects can be neatly placed. TRIPLE BOTTOM LINE Many facility professionals, especially those that have attended IFMA’s credentialing courses, have heard of the “triple bottom line,” which considers the financial, social and environmental perspectives in building a business case. Given the above paragraph addresses the fiscal aspect, in this section, we will further vet the social and environmental and their respective financial effect. The social bottom line can be broken into three subsets: employee, marketplace and community. The employee perspective considers the impact the built environment has on staff, contractors and service providers. For example, is the office space adequately lit (preferably natural) and comfortable with good ergonomics and outside views; or do the dim lighting, tall gray cubicles and bone white walls make the employees feel more like they are shackling in to the dungeon as they sit down at the desks? These items, while seemingly benign, significantly affect the health, mood and productivity of workers. The second component to the social bottom line evaluates how the organization is perceived in the marketplace; facilities, of course, play a key role in establishing image and branding. This perception should be leveraged in budget proposals, especially for customer-facing buildings and those that have significant presence in the community. Which brings us to the third leg of the social bottom line — community. An organization’s contribution and relationships within a locale are crucial to their long-term success; facility departments can go a long way in building positive relationships through community involvement and support. Hosting charitable events and sharing of parking lots to support the like are good examples. These three aspects of the social bottom line combine to drive market share, perceived value, revenue generation and profit margins. The environmental bottom line ties closely with the social, as an organization’s sustainability record and efforts feed into the above discussed social perspective. Survey results such as these reflect the importance sustainability has in the marketplace. Facility departments have oversight of roughly 75 percent of the energy a building consumes and typically manage the site’s waste stream; these facts should be leveraged in related project business cases. IN-YOUR-FACE BUSINESS CASE Historically, business cases are lengthy and verbose, starting off with a wordy executive summary, followed by pages of explanation and analysis, coupled with various tables and graphs. Sadly, management tends to skip over all your lawyerly persuasion, sound arguments and artful pie charts to get to the meat on that infamous last page. If we are working to change our approach, as discussed above, then we should revise the presentation thereof — introduce the “In-Your-Face Business Case.” This succinct approach provides a brief introduction (one or two sentences stating or defining the problem) and quantifies the current risk and potential impact to productivity, including that of not approving the project. The rule of 100/10/1 and triple bottom line are incorporated into the business argument. All of this, including costs and savings, are clearly identified on page one. The timeline, milestones and critical decision points should be documented on page two. The data justifying the decision and other supporting documents are attached as appendices to the business case. This model keeps the important information of risks, costs and business impact altogether on the front page, so that stakeholders do not get lost in the packet of information while you make your plea for approval. PRESENTING YOUR BUSINESS CASE Ultimately, presentation of your business case is a culmination of your team’s efforts to continuously sell the value of the department throughout the organization. To aid in the selling and presenting of a business case or budget to upper management, remember the mnemonic “C-SUITE,” defined in the box to the left. OTHER CONSIDERATIONS In addition to the above advice, here are a few other tidbits to keep in mind. Before beginning any project that might remotely have a sustainability component, contact the local utility provider to identify potential incentives. Many have prescriptive incentives that are rather straightforward; however, custom efficiency programs should be considered for larger, more complicated projects as they will generally return greater incentives. Typically, a utility company will have folks available that can assist with measuring and calculating energy savings. Before making any adjustments or changes that could save energy or improve occupant productivity or satisfaction, identify and measure the before and after data. This information can then be used to quantify and market the savings. Lastly, if management will not commit to funding the entire project, consider tackling it in phases. Start with the portion that stands to yield the greatest return or success, then utilize that outcome to justify the remaining scope. CONCLUSION In short, facility management, staff and contractors should always be selling the value they and their department return to the organization. Those efforts coupled with the above discussed tools will hopefully yield the desired results in receiving the necessary funding to drive facility projects forward. Nielsen’s Global Corporate Sustainability Report 66% Percent of global respondents willing to pay more for products/services from companies committed to positive social and environmental impact Accenture report in 2010 93% Percent of 766 global corporate executives that consider sustainability critically important and align it with their core values COLLECT DATA Assemble financial information, including average burdened costs per full-time employee, average revenue generation per full-time employee, cost of downtime, profit margin, maintenance and utility expenses, etc. These numbers will be used to estimate costs associated with risk and potential business impact (positive and negative). Additionally, benchmark data, such as operations and maintenance costs per square foot, occupant, student, etc. may support your claim. STUDY PLAYERS Identify the stakeholders and decision makers; determine their position power and personal influence. Research their business drivers, political motivators, causes and passions. Determine if they are an inhibitor or enabler, potential winner or loser if your project is approved. UNDERSTAND BUSINESS ENVIRONMENT Discern current business and political climate. Observe industry trends and internal and external pressures. These factors can be used to shape your argument; incorporate them into the triple bottom line. INTERPRET FACILITIES It is crucial that facility needs are translated into business terms. Management does not need to understand how or why a system works; you need to communicate the impact that the system/equipment failure has on business, risk, market image, etc. This is where a facility manager/director must be well-versed in the language of business. TOUT SUCCESS Given selling is a continual process, a facility department should have a marketing plan that identifies the various touchpoints, or means by which department staff, contractors and applications (e.g., CMMS) interact with the customer (occupants, management, etc.) The value and successes of the facility department should be promoted through these touchpoints; there are many ways to do so passively. EXECUTE A key part to selling is delivering on the promises you sold to the stakeholders. Thus, a robust facility management program should be in-place or at least in the process thereof, so management can see the return of their investment in the department and facilities. JOHN RIMER, CFM, is president of FM360 Consulting and has 20 years’ facility management experience in a variety of capacities and industries. He uses his breadth of knowledge and diverse expertise to provide a comprehensive perspective to his clients and students that assists them in furthering their facility programs.

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